"(a) a company which exists wholly or mainly for the purpose of carrying on one or more qualifying trades, or" and

In subsection (3B) for paragraph (a) substitute:

"(a) wholly or mainly carrying on a trade or trades within one or more of the activities falling within section 297(2)(a) to (g) but not within subsection (3C) below; and".'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

273

Schedule 17, page 389, line 30, at end insert

'(4) In section 293 of the Taxes Act 1988 (Qualifying Companies), in subsection 3C after the words "to the company receiving them" insert "or the criteria set out in sub-paragraph (2) of Paragraph 22 of Schedule 14 to the Finance Act 2000 are met in relation to the receipt of royalties or licence fees from the exploitation of relevant financial assets (as defined in that Paragraph) or relevant financial assets and other assets acquired by the company provided that such other assets were acquired by the relevant company for bona fide commercial reasons in order to exploit its own relevant intangible assets by providing them or the use of them as part of an assembly or to be used together as part of a larger assembly to be constructed by those who as users pay the royalties or licence fees in question".'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

274

Schedule 17, page 389, line 30, at end insert

'(4) In section 293 (Qualifying Companies) in section (6A), for the figure "15" substitute "30" and for the figure "16" substitute "32".'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

275

Schedule 17, page 389, line 30, at end insert

'(4) In section 297 of the Taxes Act 1988 (Qualifying Trades), after the words "receiving royalties or licence fees" insert "other than the leasing or hiring or disposals by hire purchase of products which have been produced by or on behalf of the applicable company itself, provided that where the products are produced on behalf of the relevant company they are produced using an intangible asset of the relevant company which would for the purposes of Paragraph 22 of Schedule 14 to the Finance Act 2000 be a relevant intangible asset".'.

(1) For the purposes of section 842AA and Schedule 28B, where a venture capital trust ("the first trust") acquires control of another venture capital trust ("the second trust") then

(a) in assessing the qualifying holdings of the first trust any shares in the second trust shall be disregarded and investments made by the second trust shall, for so long as it remains under the control of the first trust, be deemed to have been made by the first trust; and

(b) shares in the first trust acquired by individuals in exchange for shares in the second trust shall be deemed to have been acquired by them at the same time as the shares in the second trust, and there shall be deemed to have been no disposal by them of their shares in the second trust.

(2) In subsection (1) above control shall have the meaning given it by section 840 below.".'.

Schedule 18, page 395, line 24, after 'assets', insert 'or partly of relevant intangible assets and partly of other intangible assets provided that such other assets were acquired by the relevant company for bona fide commercial reasons in order to exploit its own relevant intangible assets by providing them or the use of them as part of an assembly or to be used together as part of a larger assembly to be constructed by those who as users pay the royalties or licence fees in question'.

"(5AD) Regulations under paragraph 11B of Schedule 28B may make provision for the purposes of subsection (2)(b) to (d) above for securing that where

(a) there is an exchange of shares to which regulations under that paragraph apply, and

(b) the new shares are treated by virtue of the regulations as meeting the requirements of that Schedule,

the value of the holding of new shares, and of any original shares that are retained under the exchange, shall be taken to be an amount such that the requirements of subsection (2)(b) to (d) above do not cease to be met by reason of the exchange.

(5AE) In subsection (5AD) above

(a) 'shares' includes securities; and

(b) 'exchange of shares', 'new shares' and 'original shares' have the same meaning as in paragraph 11B of Schedule 28B.".'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

276

Clause 65, page 44, line 38, at end insert

'(2A) In subsection (5), for the third and fourth columns of the table (which relates to gains on disposals of non-business assets) substitute

Gains on disposals of non-business assets

Number of whole years in qualifying holding
period

Percentage of gain chargeable

1

100

2

100

3

80

4 or more

60

.'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

277

Clause 65, page 45, line 18, at end insert

'(3A) In sub-paragraph (2)(b) of paragraph 2 of Schedule A1 to the Taxation of Chargeable Gains Act 1992 (period for which an asset is held and relevant period of ownership) for "ten" substitute "four''.'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

278

Clause 66, page 45, line 22, after 'paragraph', insert

'3. (Rules for determining whether a gain is a gain on the disposal of a business asset or a non-business asset), after sub-paragraph (5) insert

"(6) Where sub-paragraph (2) of this Paragraph applies the person to whom the gain accrues shall be entitled by notice given within a period of two years immediately following the tax year in which the gain accrues to elect as at the date when the asset became or (as the case may be) ceased to be a business asset to have the asset treated as if it had been sold on that day by the person making the disposal and immediately re-acquired by him at its market value at that date and the provisions of sub-paragraph (5) shall mutatis mutandis apply to the two gains for the purposes of paper relief" and in paragraph'.

Clause 66, page 46, line 6, after '(ii)' insert 'at the time when the shares were acquired'.

Mr Nick St. Aubyn
Mr Howard Flight [R]

151

Clause 66, page 46, line 10, after 'individual', insert 'for a period of not less than 24 months during the time he owned shares in the company'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

280

Clause 66, page 46, line 17, after '(ii)', insert 'at the time when the shares were acquired'.

Mr David Heathcoat-Amory [R]
Mr Richard Ottaway
Mr Howard Flight [R]

281

Clause 66, page 46, line 29, after '(ii)', insert 'at the time when the shares were acquired the individual was an officer or employee of the company, or of a company having a relevant connection with it, or

'(4A) For the purposes of this Act a holding company means a company whose business consists wholly or mainly of the holding of shares in one or more companies in which it has a shareholding of 40 per cent. or more.'.

Mr Howard Flight
Mr Ian Taylor

292

Clause 66, page 46, line 31, at end insert

'"Venture Capital Investment Trust" means an investment trust in respect of which holdings in companies which are not listed on a recognised stock exchange represent more than 50 per cent. by value of the investment trust's investments and for the purposes of this definition "investment trust" and "holding" shall be construed in accordance with section 842 of the Taxes Act.'.